BHP likely to make offer to Rio, says analyst

There has been speculation Rio Tinto may scrap or alter its proposed $US19.5 billion ($A25.68 billion) deal with Aluminum Corporation of China (Chinalco).

The speculation comes despite repeated assurances from Rio Tinto executives that they want the deal to proceed in its current form.

The Chinalco plan was agreed to in February but since then Rio's shares have increased substantially raising concerns Chinalco may be getting too attractive a deal.

Amid Rio Tinto shareholder disquiet, UBS analysts said in a report on Friday said BHP Billiton may offer an alternative.

UBS said if Australia's Foreign Investment Review Board agreed to the Chinalco deal, BHP will probably make its move.

"If FIRB announces its approval of the proposal on or before June 24, we believe BHP will likely feel compelled to act prior to the end of July 2009 in order to prevent the deal from progressing," UBS said.

"Once the shareholder vote has been conducted (and assuming it passes), we believe BHP will no longer be able to prevent the proposal from being completed," analysts said.

UBS said BHP could help Chinalco by underwriting a substantial rights offering, and in exchange propose an iron ore joint venture in the Pilbara.

The report said such a joint venture could provide synergies of about $US10 ($A13.17) billion.